In Al-Hasawi v Nottingham Forest Football Club Ltd [2018] EWHC 2884 (Ch) the High Court considered whether an entire agreement clause in a share purchase agreement precluded the buyer from bringing a claim under the Misrepresentation Act 1967. HHJ Cooke reversed the summary judgment decision of Master Bowles in NF Football Investments Ltd v NFFC Group Holdings Ltd [2018] EWHC 1346 (Ch)(see FC Feature 27 June 2018) and held that the entire agreement clause did not exclude a claim in misrepresentation and that such claims could only be excluded by “clear wording”.
Under the SPA, the buyer agreed to purchase the whole of the issued share capital in Nottingham Forest Football Club. The buyer claimed that the seller falsely represented that the Club’s debts were £6.6m, when they in fact exceeded £10m. The seller argued that the entire agreement clause in the SPA precluded the buyer from bringing a claim under the Misrepresentation Act 1967 and that the buyer therefore only had a claim under the contractual indemnity. In the summary judgment application, Master Bowles agreed with the seller’s construction. Focussing on the elaborate provision for specific claims to be brought under the contractual indemnity, he inferred an intention that claims should not be brought outside these specific provisions and was satisfied that, in this case, the entire agreement clause excluded claims in misrepresentation.
HHJ Cooke rejected this construction. He did not agree that “contractual language providing for one type of claim carries an implication that all other types of claim are intended to be excluded” and noted that if the seller’s construction had been correct, no claim could be brought in respect of any misrepresentation, whether covered by the contractual indemnity or not.
What points of interest can be taken from this judgment?
The court concluded that “what must be shown is clear wording establishing an intention to go beyond defining the scope of the contractual agreement and exclude other claims”. Wording in the entire agreement clause that ‘representations are extinguished’ did not constitute clear wording for the purposes of excluding other claims and was only sufficient to ‘extinguish’ any contractual effect that the representations may have had.
Accordingly, the court held that the entire agreement clause did not preclude the buyer from claiming under the Misrepresentation Act 1967.
This case reinforces that, as noted in FC Feature 27 June 2018 on the summary judgment application, the prudent course for those seeking to exclude misrepresentation claims is to adopt the conventional well-established formulations used in cases such as AXA Sun Life Services Plc v Campbell Martin Ltd [2011] EWCA Civ 133. Conventionally, that would mean adopting a clause which records that no representations had been made, or that no representations had been relied upon, or, simply, that there is no liability for misrepresentations.
Whilst the courts have repeatedly referred to party autonomy permitting parties to deal with putative claims in respect of share or asset purchase agreements by way of contractual processes created within the structure of the agreement itself, care needs to be taken if it is intended to exclude misrepresentation claims and that must be clearly stated.